MONEY - WEEK THREE

MONEY

Money is anything that generally accepted as a medium of exchange and for settlement of debt. It can also be define as any commodity that is generally accepted as a medium of exchange.

Development of Money

In the olden days before the advent of money, different commodities were used as money. Commodities like salts, cowries, slaves, and elephant tusk, beads etc. But this form of money did not satisfy most of required of good means of exchange. money originated as a result of problem posed by barter system of exchange.

Paper money originated from the use of receipt issued by the goldsmiths in exchange for deposit of gold. The receipt became bank notes and the goldsmiths become bankers.

Trade by Barter:Barter is an exchange of goods for goods. It is the process of direct exchange. Trade by barter have a lot of problems.

Problems of Trade by Barter

1. Double Coincidence of Want: This is the problem of getting someone who has what you need and wants what you have. E.g. A farmer who produces yam and want a pot, he did not only look for the person who has pot, but a person who has pot and also need yam.
2. Problems of Exchange rate: There is no common standard of value and so there was problem of adequate valuation of goods to be Exchange with another, eg the quantity of yam to exchange with a tin of rice.
3. Problem of Indivisibility: problem arises when a person who owns large indivisible commodities want to exchange his good with small item e.g is a person who owns a goat and wants a fowl, he may find it difficult to exchange it because he may not want to exchange his whole goat with a fowl and part of the goat will not be exchange.
4. Problem of Storage and Savings: There is problem of storing and saving because the goods involve are perishable goods.
5. There is no standard for the deferred payment. lending and borrowing are difficult: Those who are in position to lend their goods to others, there was no guarantee that the term of pay back will be of the same size, colour, shape etc.
6. Impossibility of Large ScaleProduction: - As the demand is uncertain, division of labour and large scale production are never possible. If you produce in large quantity, there is no assurance of demand.

TYPES OF MONEY

1. Commodity Money: It is items or commodities that is generally accepted as a medium of Exchange such items most have both money value and intrinsic value (commodityvalue). commodities such as gold, silver and bead serve as commodity money.
2. Token Money: Is money used as a medium of exchange which have higher face value then the value of material from which it is minted (printed).
3. Fiduciary Issue: This is describe as part of note, issue that is not backed by gold.
4. Quasi Money: This is also known as near money and can be described as money asset that serve partial as money and are convertible to money in a short time without loss of value e.g  bank Draft, Cheque, treasury bill.
5. Coins: Coins are money made of metal such as gold, silver, copper, zinc etc.eg standard coins and token coins.

Token Coins: Are coins whose value as money is greater than the value of commodity from which it is minted.

Standard Coins: Contains the fullface value of material used for making it.

Bank Not: Bank note are money made of paper issued by central bank. The amount of money printed on them some are backed up by gold and some are not.

Bank Deposit: It includes money deposited in current account which can be withdrawn with cheque.

FUNCTIONS OF MONEY

1. It serves as a medium of Exchange: One can buy varieties of food and pay for them with money no need of worrying about coincidence of want.
2. It serves as a unit of account: Record of payment and receipt can be conveniently kept in monetary unit. This is because the value of goods and services which are bought and sold is measured in terms of money or prices at which they can be bought or sold.
3. It serves as a store of value: Money could be saved for future use. It serves as a good store of value provided there is no inflation.
4. It serves as a measure of Value: Since the value of goods and services are expressed as prices. It is possible to use money as a yard stick for measuring and comparing the worth of goods and services, money value of any commodity shows the value of that commodity. A commodity which has higher price is valued more than a commodity of lower cost.
5. It serves as a standard of deferred payment: The use of money makes it possible to buy and sell goods on credit and to make payment at a future date.

Questions.

1 Define money?

2 Explain 4 function of money?

3 list and explain 5 types of money?

4 what is trade by barter?

5 Highlight the problems pose by trade by barter

 Performance objectives

By the end of this lesson the students will be able to

1 explain the qualities of money

2 Describe credit card

3 explain ATM

VISUAL VIDEO CLIP

PART ONE 

                     PART TWO

                  PART THREE